IATA forecasts record profit of $35.6B this year for the airline industry, a downward revision from a prior prediction of $39.4B.

A profit margin of 5.1% is anticipated for airlines in 2016.

Looking ahead, IATA warns on the impact of higher oil prices next year. Jet fuel prices are expected to increase to $64.90/bbl from $52.10/bbl this year. Traffic is seen slowing to 5.1% growth and load factor is seen slipping below 80%.

IATA says the strongest region next year will be North America with net post-tax profits of $18.1B.

Wolfe Research analyst Hunter Keay isn't worried that higher oil prices in the future will be a negative for airline companies.

He thinks the impact of capacity discipline is more important than the bottom line of a lower fuel spend. Keay's analysis is below.

"Multiples drive about 70 percent of the movement in stock prices. And multiples are dictated by the perception of pricing power, and pricing power is dictated by capacity control. Excess capacity drives pricing down... It’s not about profits, it’s about how they make the profits, about pricing power. Capacity discipline and fundamental behaviors are far more important than the amount of money they earn."

Oil prices are up 0.7% on the day, but have dropped sharply over the last month.

Don't count out airline stocks as growth stocks just yet. A forecast from the IATA calls for a doubling of the number of global passengers to 7.2B by 2035.

The CAGR (compound average growth rate) on the outlook works out to 3.7%, with steady growth across regions (China +4.7% CAGR, North America +2.8%, Europe +2.5%, Latin America +3.8%, Middle East +4.8%, Africa +5.1%).

Airline stocks are pushing higher, led by a jump in Southwest Airlines (LUV+3.1%). A mix of macroeconomic factors, including a drop in oil prices and improved consumer confidence readings could be helping to lift sentiment on the drowsy sector.